Craig Harris / Arizona Republic

Published 8:30 a.m. MT Apr. 22, 2020

A few weeks after Arizona Gov. Doug Ducey won a second term, his chief of staff announced he was departing for "new opportunities outside of state government."

Kirk Adams seemingly had limitless options.

He's a former House speaker with strong ties to the Republican establishment and deep-pocketed donors. He was key to Ducey's election as governor. And as his chief of staff, Adams had led Ducey's highest-profile policy initiatives. Lawmakers privately called him "governor." He also oversaw day-to-day operations of state government, including hiring many agency heads.

But when Adams left the Governor's Office on Dec. 14, 2018, he didn't venture very far.

Less than four months later, Adams was sitting alongside developer Robert Flaxman during negotiations with the State Land Department, which is overseen by Ducey appointee Lisa Atkins. The topic: the potential multibillion-dollar Desert Ridge development in northeast Phoenix.

Later that year Adams would represent another company doing business with the state: Valor Global, which provides up to $2 million in call center services to the Arizona Department of Revenue.

At the same time, Adams continued to advise Ducey, formally at first, then informally.

For public officials who leave government employment, state law requires a 12-month "cooling off" period.

The law says a public employee "shall not represent another person for compensation before a public agency by which the officer or employee is or was employed within the preceding twelve months ... concerning any matter with which the officer or employee was directly concerned and in which the officer or employee personally participated."

Arizona's conflict-of-interest statute was intended to protect taxpayers from government workers cashing in on public service by selling influence accrued while working for the public, said Keith Swisher, a University of Arizona ethics professor. The penalties range from a misdemeanor to low-level felony. 

Adams, who is not registered with the state as a lobbyist , said his work didn't violate the law.

Before he takes on a client who does business with the state, he consults with the Governor's Office as well as his business and compliance attorneys to ensure everything is legal, Adams said.

The law applies only to "what the former employee did as part of a job in state government," said Daniel Scarpinato, who replaced Adams as Ducey's chief of staff.

But government watchdogs and ethics experts say Adams' immediate return to the halls of state government on behalf of clients is troubling.

"It looks unseemly, and it looks like corruption, or soft corruption, if the government official handling high-stakes matters for the state jumps into private employment quickly thereafter," Swisher said. "That is why there is a cooling-off period. It protects the confidence in government."

Helping a developer

Within weeks of Adams leaving his job as Ducey's chief of staff, the Republican governor hired Adams as a $1,000-a-month consultant for the first three months of  2019. Though he had a contract to do the work, Adams never billed the state for his services, according to Scarpinato.

At the same time, Adams, a Mesa Republican, was building a firm — Consilium Consulting — whose clients included generous Ducey political contributors with business before the state. 

Adams began attending meetings at the State Land Department with Flaxman, the developer, on at least May 8, and again on May 22 and July 6, 2019, public records show.

In early 2019, Flaxman had acquired through U.S. Bankruptcy Court rights to develop, in partnership with the State Land Department, prime real estate on Phoenix's northeastern edge.

The Desert Ridge project, in the works since the early 1980s, had been slowed by lawsuits, recessions, bankruptcy and numerous disputes between the state and "master developers," leaving most of it undeveloped three decades later. The location had shown promise. It is home to Mayo Clinic, American Express, a JW Marriott resort, mall, entertainment district and thousands of homes. 

The "state can make a lot of money by taking that land to auction," Adams said.

Atkins, the land commissioner, said neither she nor her staff felt pressured by the Governor's Office during negotiations with Flaxman or his company, Crown Realty & Development. She described the talks as amicable.

Adams "really didn't say much" during the meetings, Deputy Land Commissioner Wesley Mehl recalled.

The Land Department declined to release records of the negotiations, citing law that allows government to "withhold the substance of confidential discussions regarding the proposed settlement of litigation."

"I think he (Adams) was there to give them advice on procedural things," Mehl said.

Adams declined to detail his discussions about the project with Flaxman, saying they were privileged conversations. He said his six-month contract with Flaxman ended Oct. 1, 2019.

A former master developer of Desert Ridge alleges in a lawsuit that Adams, Flaxman and the Ducey administration delayed development of the project, causing him to default on loans and lose the master developer rights to the land.

That, according to Bruce Gray's 2019 lawsuit against the state, opened the door for Flaxman to take over the project. State Land Department officials, as well as Flaxman, who is not named in the case, say the ongoing suit in  Maricopa County Superior Court is meritless.

Flaxman was the winning bidder when he paid $54 million for the 96.5 acres of state trust land at a bankruptcy auction, which included the master developer rights. Those rights effectively give him control of what's built on the entire 5,700 acres of Desert Ridge.

The purchase was considered a steal: The land, valued at $121 million, is zoned for about 2,500 residential units, 2 million square feet of office space, 500 hotel rooms and 100,000 square feet of retail.

Gray cites as evidence of a conspiracy campaign contributions that Flaxman made to aid Ducey's 2018 reelection. Campaign finance records show Flaxman gave $22,100. 

Flaxman said he made the contributions because he was inspired by the governor's remarks at a 2018 Southern California fundraiser.

Gray's lawsuit alleges the state Land Department "met regularly and secretively with city officials and other developers with the intent to block Gray's development, force Gray out of Desert Ridge, and replace Gray with a preferred developer."

Previously, the most Flaxman had contributed to Arizona political campaigns was $1,700, to a pair of legislative candidates in 2016, records show.

"Kirk went to work for the guy who made (political) donations," Gray told The Arizona Republic. "It was just a pay for play."

Flaxman said Gray sees a conspiracy where none exists. If Gray had not defaulted on his loans, he would still be master developer of Desert Ridge.

Flaxman said his campaign contributions to Ducey and hiring of Adams were not intended to influence his negotiations with the State Land Department. 

"That would be a totally inappropriate thing to do," Flaxman said. "The State Land Department has its own commissioner. That's the protocol for us to work through."

State contractor gets assistance

A few months after Adams took on Flaxman as a client, he began representing an Arizona company that provides call center services to the state Department of Revenue.

Valor Global had already won contracts with the state while Adams was part of the Ducey administration.

Vicki Mayo, a Valor Global vice president, served as deputy director of the Arizona Department of Child Safety during the first few months after Ducey took office. And she and her husband, Valor Global CEO Simerdeep Mayo, had between March 2016 and November 2017 contributed nearly $25,000 to committees to elect Ducey or promote the governor's agenda, records show.

In 2016, Valor received a no-bid contract from the state Revenue Department to operate a call center answering Arizona taxpayers' questions.

A year after receiving its no-bid contract, Valor Global won through a competitive bid a five-year contract to continue providing tax-related call center services. The deal is worth up to $2 million a year.

Adams attended meetings at Revenue — on Aug. 26 and Sept. 30, 2019 — to review the company's performance under the contract, department spokesman Ed Greenberg said.

The agency "was never instructed, pressured or directed to consider any particular call center management company as it pursued a solution to improving customer service for taxpayers," Greenberg said.

At the same time Adams represented Valor Global and Flaxman, he was working as an unpaid consultant to Ducey. 

Following the three-month contract with the Governor's Office, Adams stayed on as an unpaid adviser to help the administration negotiate the gaming compact with Native American tribes. He said he remains in that role.

Adams said if he had a conflict of interest representing businesses while also acting as an unpaid Ducey adviser, he would "ask to be released from the duty" of helping the governor, but he didn't see a problem with the arrangement. 

Diane Brown, who leads the consumer watchdog group Arizona PIRG, disagrees.  

"Corporate interests will seek to benefit from Kirk's relationship with the governor," Brown said.

Conflict-of-interest law that's rarely enforced

Arizona's conflict-of-interest law prohibits a "public officer" or government employee from representing another person on any matter in which the public employee had "a substantial and material exercise of administrative discretion."

The Attorney General's handbook says the law, first enacted in June 1968 and revised several times over the decades, is intended to prevent self-dealing by public officials and to "remove or limit the possibility of personal influence which might bear upon an official's decision."

"One cannot serve two masters with conflicting interests," the handbook states. The law is broad enough to recognize "an impairment of impartial judgment can occur in even the most well-meaning men when their personal economic interests are affected by the business they transact on behalf of the government."

The Attorney General's Office said it has rarely, if ever, pursued prosecution under the law. 

The Arizona Secretary of State's Office last year asked the Attorney General's Office to determine if a former Republican lawmaker had violated the ban on lobbying within a year of leaving office. The lawmaker was cleared.

Terry Goddard, whose involvement in state politics stretches back to the 1960s, and who served as attorney general from 2003-2011, said he knows of no state prosecution, let alone conviction regarding the state's conflict-of-interest law.

​"I'm not aware of anything but talk on conflict of interest," Goddard said.

Scarpinato, Ducey's chief of staff, said the "law doesn't prevent someone from ever having any involvement in private sector activities." In Adams' case, "the chief of staff has responsibilities across state government, but is not the direct line of managerial oversight of agency directors," Scarpinato continued. That oversight role, he said, belongs to Ducey's chief operating officer.

But Brown, with the consumer watchdog group Arizona PIRG, said it's hard to imagine Adams, as chief of staff, wasn't involved in "all major and minor policy decisions in the state."

Adams led Ducey's transition into office in 2014, which involved appointing state agency heads, including Atkins in the Land Department. Public records obtained by The Republic show Adams, as chief of staff, sent emails to state agency directors, including Atkins, to inform them of decisions made by the Ducey administration.

And Adams advised Ducey on the ouster of agency heads like Economic Security Director Tim Jeffries in 2016 and State Parks Director Sue Black in 2018. Jeffries alleges in a lawsuit against the state that it was Adams, not Ducey, who forced him out.

Swisher, the UA ethics professor, said the law leaves plenty of wiggle room. Where Adams is concerned it "may be all smoke and no fire," but it looks unseemly, Swisher said,

Other Ducey administration alums have handled post-public-service work differently.

After leaving the Governor's Office on May 4, 2018, Michael Liburdi, Ducey's former general counsel, waited a year before beginning to represent the State Land Department. Records show he attended a meeting at the State Land Department on May 22, 2019, the same day his friend Adams was representing Flaxman.

Liburdi was a partner at Greenberg Traurig, the State Land Department's outside counsel. But his work for the state was short lived. The U.S. Senate confirmed Liburdi's appointment as a federal judge on July 30.

Liburdi directed questions to Rebecca Burnham at Greenberg Traurig. She did not return several messages. 

A favor for Flaxman

When Flaxman called Adams in March 2019 he needed help with more than a massive Phoenix development. 

The Crown Realty & Development CEO had just been charged in the national college entrance cheating scandal, in which federal prosecutors alleged that wealthy parents had used bribes to get their children accepted to elite colleges.

Flaxman offered to resign from his development company but his partners wouldn't let him, he said. 

"They instructed me to proceed, and they would let me know if there was a better steward for the project," Flaxman said.

The charges of conspiracy to commit mail fraud and honest services mail fraud could put him behind bars for 20 years, records show. 

Rather than go to trial, Flaxman in April 2019 agreed to plead guilty. Under the deal, prosecutors wanted him to spend eight months in prison followed by a year of supervised release. 

Flaxman's lawyer asked that he be sentenced to time served— Flaxman had spent a day in custody when he was arrested — plus two years of supervised release, 250 hours of community service and a fine. Ultimately, other parents, including actress Felicity Huffman, sentenced in the scandal received punishments ranging from probation to several months in prison.

U.S. District Court Judge Indira Talwani would decide the developer's punishment.

Before the sentencing, Adams wrote a letter to the judge on Flaxman's behalf. In it, Adams described Flaxman as "an honest person who inspires trust and confidence in others … Since meeting Robert, I have seen him admit his guilt and take full responsibility for his crime.

Flaxman had only committed the crime to help his daughter, Adams wrote, asking that the judge's sentence allow Flaxman "to keep doing the important work he is engaged in for the state of Arizona."

In the letter, Adams noted his own credentials, citing his time in the Legislature and as Ducey's chief of staff. 

Flaxman said it was a coincidence that he hired Adams around the time he was indicted on March 12, 2019. 

"It was fortuitous in that a gentleman of his stature and credibility would be willing to join the project when my credibility was suspect," Flaxman said of Adams.

In October, Flaxman was sentenced to one month in federal prison. He was out by Christmas.

Source